Red Mountain Mining will now significantly ramp up their Batangas Gold project in the Philippines following the formalising of their joint venture agreement this week with UK based Bluebird Merchant Ventures. Red Mountain management negotiated a sublime deal with Bluebird that values the Batangas project at 3 times the entire company's market cap.
Perth based Red Mountain Mining will now significantly ramp up their Batangas Gold project in the Philippines following the formalising of their joint venture agreement this week with UK based Bluebird Merchant Ventures.
Red Mountain Mining Managing Director Jon Dugdale secured the interest of Bluebird in the Batangas Gold project last year and the two organisations have been working towards forming a joint venture that was contingent upon Bluebird first listing in London.
Bluebird did manage to list in London recently but experienced a number of technical delays along the way which prevented the joint venture from forming within the originally anticipated time frame.
However, it seems that the delay is now somewhat immaterial given that the valuation achieved by Red Mountain for the Batangas project in the joint venture agreement is nearly 3 times the current market cap of the entire company.
Bluebird paid USD$1.7m to Red Mountain for 25% of the project valuing 100% of it at USD$6.8m or AUD$9.3m.
With a current market cap of just $3m, Red Mountain management appear to have negotiated a decent outcome for their shareholders.
The parties will now fund the JV on a 75/25 percent basis however Bluebird have two further opportunities to increase their project funding and move their share of the project from 25% to 50.1%.
They can choose to increase to 50.1% within 12 months by contributing a further US$1.7m before the permitting and the DFS has been completed.
If however Bluebird choose to wait until after permitting and the DFS has been completed to move to 50.1%, they will need to contribute a further $3.8m in recognition of the increased value of the project at that stage. They have 12 months to take up this option.
Bluebird this week also paid Red Mountain USD$158 000 to square off for interest, costs and accrued Batangas JV contributions arising from the delay in Bluebird listing.
Red Mountain will now kick the project into gear by completing the nearly finished PFS before updating it to a DFS and they will now seek to secure the remaining outstanding permits for the project.
Compared to the original scoping study that was done a couple of years ago, it is reasonable to assume that the Batangas project bottom line is now looking even more attractive with the significant increase in the Australian dollar gold price and the sizeable reduction in the all important price of diesel due to the sharp drop in oil prices.
Many mining projects are reporting a drop in input costs generally which is a reflection of the downturn in the broader resources market with gold being the only significant shining light able to take advantage of the reduced cost environment.
Red Mountain Managing Director Mr Jon Dugdale said, “Now that the Batangas JV is operational, and funded, we can bring together all the work over the past 12 to 18 months to fast track completion of the development studies and permitting.”
"This JV brings together two highly experienced board and executive teams, with the mining and development experience to develop this exciting gold project.”